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NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Securities Market

A company raises funds by selling new equity shares directly to its existing shareholders in proportion to their holdings. This method of raising capital is called:

This is a rights issue. New shares are offered to existing shareholders in proportion to their current holdings. It differs from a QIP, which targets institutions, an offer for sale, where existing holders sell shares, and a follow-on public offer, which is open to all investors.

  1. ARights issueCorrect
  2. BQualified institutions placement
  3. COffer for sale
  4. DFollow-on public offer to all investors

Explanation

A rights issue offers new shares to existing shareholders in proportion to their holdings. A QIP targets qualified institutional buyers, an offer for sale involves existing shareholders selling their shares rather than the company issuing new ones, and an FPO is open to the public.

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